Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income ... vs Diversey India Hygiene Private ... on 19 March, 2026
आयकर अपीलीय अिधकरण ाय पीठ मुं बई म।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, MUMBAI
BEFORE SHRI AMIT SHUKLA, JM &
SHRI ARUN KHODPIA, AM
I.T.A. No.6262/Mum/2024
(Assessment Year: 2016-17)
DCIT-1(3)(1), Diversey India Hygiene Pvt. Ltd.
Room No. 540, 5th Floor, 5th Floor, Ackruti Center Point,
Aayakar Bhavan, M.K. Road, Vs. MIDC Center Road, Chakala,
Mumbai-400020. MIDC S.O Mumbai-400093.
PAN: AABCC1597Q
Revenue - अपीलाथ / Appellant Assessee - थ / Respondent
:
Revenue by : Shri Annavaran Kosuri, Sr. DR
Assessee by : Shri Dharan Gandhi, AR
Date of Hearing : 24.12.2025
Date of Pronouncement : 19.03.2026
ORDER
Per Arun Khodpia, AM:
The captioned appeal is filed by the revenue against the order of Commissioner of Income Tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi [in short "Ld. CIT(A)"] dated 05.09.2024 for the Assessment Year (AY) 2016- 17, which in turn arises from the order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) dated 01.03.2019 passed by DCIT-11(2(1), Mumbai. The grounds of appeal raised by the Revenue are as under:
"1. Whether on the facts and circumstances of the case & in law is the Ld. CIT(A) erred in deleting of the gross profits addition for alleged out-of-book sales despite the ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
Assessing officer's findings of discrepancies in the financial statements and supporting documents?
2. Whether on the facts and circumstances of the case and in law is the Ld. CIT(A) is justified in accepting the assessee's claim regarding unclaimed closing stock when the Assessing Officer found inconsistencies between the reported figures and the actual inventory records?
3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) failed to consider the AO's valid findings regarding the discrepancies in reporting excess finished goods and work in progress, thereby misapplying the principles of tax assessment?
4.the Ld. CIT(A) erred in deleting the addition made for the difference in turnover when the AO identified substantial discrepancies between figures reported in tax return & the tax audit report?"
2. Brief facts of the case are that the assessee has filed its return of income for the relevant year on 30.11.2016 declaring total income at Rs. 99,83,50,660/- under the normal provisions of the Act and book profit of Rs. 103,56,95,027/- under section 115JB of the Act. Subsequently the assessment was reopened under section 147 of the Act with the prior approval of ld. PCIT-1, Mumbai by issuing the notice under section 148 on 21.01.2019. During the assessment proceeding, the ld. AO has observed that there were certain discrepancies in the opening stock of the assessee, when it is compared with the closing stock of the preceding AY 2015-16. On examination of stock from P&L A/c, Form 3CD - turnover schedule, the ld. AO has pointed out that the opening stock of raw-material shown in P&L A/c was Nil and the purchases are of Rs. 240,97,23,552/-, out of the available raw-material the assessee has consumed raw- material on Rs. 105,58,77,697/-. Accordingly, the closing stock should have come to Rs. 135,38,45,855/- instead of closing stock which is shown at Nil in the P&L A/c by the assessee. The issue was show-caused to the assessee in response to which the 2 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
assessee has submitted before the ld. AO, that during the year under consideration the assessee company got merged in M/s Sealed Air India Pvt. Ltd. (SAIPL). The details of opening stock, purchase, closing stock and consumption were also furnished before the ld. AO along with ITR reference and financial statement reference. It is further clarified that the consumption amount mentioned in Tax Audit Report (TAR) pertains solely to the raw-material part and does not consider the traded goods part. In addition to the raw-material consumption, the TAR also considers consumption of stores and spares which came to Rs. 35,00,000/-, as given in other expenses schedule of the financials. Assessee referred to the assessment in the case of SAIPL for AY 2015-16, wherein no such inference was drawn or addition made by the ld. AO. Assessee requested to drop the proceedings on account of difference in stocks.
3. The reply of assessee could not impress upon the ld. AO, he observed that the assessee has not file any explanation about the difference pointed out regarding the submissions made before the Registrar of Companies. Accordingly, the ld. AO has made an estimated addition of Rs. 71,69,96,765/- @ 52.96% (rate of GP adopted by the assessee) of Rs. 135,38,45,855/-, being the differences in the opening and closing stock of the assessee, treating the same as out of books / suppressed sale. The ld. AR further made an addition of Rs. 6,59,78,916/- by estimating the GP @ 52.96% of Rs. 12,45,82,545/- by treating the unclaimed closing stock of raw-material as opening stock, treated as unaccounted / out of book sale of such stock. Similarly, an addition of Rs. 27,74,504/- was made on account of excess finished goods (opening stock) under section 69C of the Act and further unclaimed work-in-progress as opening 3 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
stock of Rs. 29,82,347/- by treating the same as unexplained expenditure under section 69C of the Act.
4. The ld. AO observed a difference in turnover of the assessee which is shown in the return of income for Rs. 548.12, as against the amount of turnover in Form 3CD for Rs. 571.60 crore, accordingly the difference of Rs. 23,47,58,398/- was added to the income of assessee, in absence of any submissions or explanations by the assessee.
5. In view of aforesaid observations, the ld. AO had re-computed the assessed income of the assessee making aforesaid additions, detailed as under:
Total Income Rs. 99,83,50,660/-
As per Return of income)
Add: 1. G.P addition of out of book sale (As per para 5) Rs. 71,69,96,765/-
2. Unaccounted/out of book sale/Excess finished Rs. 7,17,35,767/- goods/unclaimed work in progress (As per para 6)
3. Difference in turnover. Rs. 23,47,58,398/-
(As per para 7)
Assessed Income Rs. 202,18,41,590/-
Book Profit u/s.115JB Rs. 103,56,95,027/-
6. Being aggrieved with the aforesaid additions by the ld. AO, the assessee preferred an appeal before the FAA, who had discussed the issues raised by the assessee to assail the findings of Ld. AO. After deliberations Ld. CIT(A) had decided the appeal in favour of the assessee. The relevant observations and findings of ld. CIT(A) are extracted as under:
7. The Ground No. 1 raised by the appellant is related to the addition of amount of Rs. 71,69,96,765/-to the returned income. It is seen that the AO has made an addition of Rs. 71,69,96,765/-, at Gross profit rate on Rs. 135,38,45,855/- being suppressed/ out of books sales while passing assessment order u/s. 143(3) of the IT Act. In this regard, the appellant has contended vide grounds of appeal filed that the AO has made the 4 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
addition without verifying the details submitted while filing return of Income. In this regard, the appellant has requested the appellate authority to delete the addition made by the AO in this regard.
7.1 During the course of appellate proceedings, the appellant has filed written submissions in support of its claim, the relevant portion of the submission is affixed here as under:
5 ITA No. 6262/MUM/2024
Diversey India Hygiene Pvt. Ltd.6 ITA No. 6262/MUM/2024
Diversey India Hygiene Pvt. Ltd.
7.2 As seen from the above, the appellant has stated that the addition made by the AO was already shown by the appellant in the return of income as per Sl. No. 6 for purchases of Part A-P&L of ITR. However, the AO has made addition to that effect by estimating the income at Gross profit rate, resulting in addition of total income by Rs. 71,69,96,765/-.The appellant has also submitted a copy of the Income Tax return, wherein an amount of Rs.
240,97,23,552/- was disclosed as total purchases.The appellant has stated that no difference in the amounts considered in the financials and as per the ITR as it had merged opening stock , closing stock with purchases of Raw material and purchase of traded goods.The appellant has further stated that purchase of traded goods could not be shown separately as there was row in ITR to show the same separately.In this regard, the appellant has requested the appellate authority to delete the above said addition.Now the question before the appellate authority is to verify whether the amount of Rs. 135,38,45,855/- was declared in the ITR or not.
7.3 The submission made by the appellant has been considered and the same is found to be acceptable to the subject matter of the appeal. Further, the claim of the appellant has been verified vis-à-vis with the ITR filed, financials and reconciliation of the purchases. On verification, it is evident that the appellant has shown the entire purchases as per Sl. No. 6 for purchases of Part A - P & L of ITR. It is also verified that there is no difference between total income declared by the appellant as per the signed financials and as per the Income Tax return filed. In this regard, it is held that it is only presentation in Tax Return of AY 2016-17 differs from the signed 7 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
financials and it clearly does not have any impact on the taxable income offered by the company in Income Tax Return filed for AY 2016-17.It is also seen that the appellant has paid taxes on the income declared by considering the entire purchases. It is settled principle that the same income cannot be taxed twice. As such, the amount made as addition being gross profit on out of book sale is liable to be deleted. There is no doubt that the income shall not be taxed twice as per the provisions of the Act. Therefore, the AO is directed to delete the addition made in the assessment order. In the result, the Ground No. 1 of the appeal is allowed.
8. The Ground Nos. 2 & 3 raised by the appellant is related to the issues addition of amountofRs.7,17,35,767/-to the returned income. It is seen that the AO has made an addition of Rs. 6,59,78,916/-, at Gross profit rate on Rs. 12,45,82,545/- being unclaimed closing stock of raw material, Rs. 29,82,347/- , being unclaimed work in progress and Rs. 27,74,504/- as unexplained expenditure being difference of finished goods claimed as per ITRs for A.Y. 2015-16 and A.Y. 2016-17,while passing assessment order u/s. 143(3) of the IT Act.In this regard, the appellant has contended vide grounds of appeal filed that the AO has made the addition without verifying the details furnished in the return of Income without considering the submissions of the appellant.In this regard, the appellant has requested the appellate authority to delete the addition made by the AO in this regard.
8.1 During the course of appellate proceedings, the appellant has filed written submissions in support of the grounds raised, the relevant portion of the submission is reproduced hereunder:
8 ITA No. 6262/MUM/2024
Diversey India Hygiene Pvt. Ltd.9 ITA No. 6262/MUM/2024
Diversey India Hygiene Pvt. Ltd.10 ITA No. 6262/MUM/2024
Diversey India Hygiene Pvt. Ltd.
8.2 As seen from the above, the appellant has submitted that closing stock of raw material amounting to Rs. 1245 lakhs for A Y 2015-16 has been correctly disclosed in the signed financials of the year under consideration as opening stock of raw material amountingtoRs.1245lakhsforAY2016-17and movement inclosing and opening stock of raw material for A Y 2016-17 as per the signed financials has been considered and reported by the Appellant in Part AP &L-38-'Other expenses' of Tax Return. As such, 11 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
The appellant has claimed that there is no difference in closing stock of raw-material of A.Y. 2015-16 and opening stock of raw material of A Y 2016-17 as alleged by the AO and requested the appellate authority to delete the addition of Rs.6,59,78,916/- on account of alleged unaccounted/ out of book sale. Further, the appellant has stated that there is no difference in closing stock of finished goods as reported in Tax Returns of DIPL and DIHPL in AY 2015-16 and opening stock of finished goods as reported in the return of DIHPL (the merged entity).In this regard, the appellant has submitted that closing work in progress of DIPL of AY 2015-16 amounting to Rs. 29,82,347/- less provisions of excise duties amounting to Rs. 2,07,843/- i.e. net work in progress amounting to Rs. 27,74,504/- has been adjusted in the opening stock of finished goods of DIHPL AY 2016-17 and claimed that the said alleged difference is clearly on account of storing work in progress of DIPL of AY 2015-16 (net of excise) amounting to Rs. 27,74,504/- included in the opening stock of finished goods. In view the submission, the Appellant has contended that the addition of Rs 57,56,851/- (27,74,504 + 29,82,347) made by the Learned DCIT on account alleged difference is erroneous and requested to delete the same.
8.3 The submissions made by the appellant have been considered and the same are found to be acceptable to the subject matter of the appeal. Further, the claim of the appellant has been verified vis-à-vis with the ITR filed, financials and reconciliation of the closing stock of A.Y. 2015-16 and opening stock of A.Y. 2016-17.On verification, it is evident that the appellant has shown the opening stock for A.Y. 2016-17 at NIL. However, the opening stock of Rs. 12,45,82,545/-, was considered in the total purchases as declared in the ITR filed.It is also verified that there is no difference between total income declared by the appellant as per the signed financials and as per the Income Tax return filed. In this regard, it is held that the opening stock of raw material was correctly claimed as the same was shown under other column of ITR of AY 2016-17 and it clearly does not have any impact on the taxable income offered by the company in Income Tax Return filed for AY 2016-17.As such, contention of the appellant with regard to unclaimed opening stock of raw material is accepted.
8.3.1 Further, with regard to unclaimed work in progress of Rs. 29,82,347/- and claim of excess finished goods of Rs. 27,74,504/-, the appellant has furnished an explanation by reconciliation of the same, which is as under:
Closing Stock of Finished Goods of DIPL as reported in Tax Rs.27,16,79,948/- Return of AY 2015-16 correctly considered in opening stock in Tax Return of DIHPL A Y 2016-17 12 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
Closing Stock of Finished Goods of DIHPLas Rs.15,64,16,072/- reported in Tax Return of AY 2015-16 correctly considered in opening stock in Tax Return of DIHPL A Y 2016-17 Combined closing stock of Finished goods Rs.42,80,96,020/- considered in Tax Return of DIHPL in AY 2016-17 (A) Add: Closing work in progress (WIP) of DIPL of Rs.29,82,347/- AY 2015-16 included in opening stock of finished goods of DIHPL AY 2016-17 - (B) Less: Difference in provisions of excise duties as Rs.2,07,843/- given in note number 19 of financials included as part of openingfinished goods - (C) Net impact of closing work in progress of DIPL Rs.27,74,504/- of AY 2015-16 (B) and difference in provisions of excise duties (C) considered in Tax Return of A Y 2016-17 in opening stock of finished goods of DIHPL and erroneouslytaxedbytheLearnedDCIT(D) ** Total Opening stock of finished goods reported Rs.43,08,70,524/- inTaxReturnofDIHPLAY2016- 17 (A+B-C) On perusal of submission, it is clear that the appellant has claimed opening work in progress of Rs. 29,82,347/- in opening stock of finished goods and the net value of the same reduced by work in progress of DIPL of AY2015-16(B) and difference in provisions of excise duties has resulted in excess claim of finished goods by an amount of Rs. 27,74,504/-.As such, it is held that the appellant has not made any excess claim in this regard and contention of the appellant is accepted.Therefore, the AO is directed to delete the addition made in the assessment order.
8.4 In view of the above discussion, the Ground Nos.2&3 of the appeal are allowed.
9. The Ground No. raised by the appellant is related to the addition of amount of Rs.
23,47,58,398/-to the returned income. It is seen that the AO has made an addition of Rs. 23,47,58,398/-, being difference of turnover as per audit report in the form 3CD and turnover declared by the appellant as per the ITR. In this regard, the appellant has stated that the AO has made the addition without verifying the actual turnover declared by the appellant in the return of 13 ITA No. 6262/MUM/2024 Diversey India Hygiene Pvt. Ltd.
Income. In this regard, the appellant has requested the appellate authority to delete the addition made by the AO in this regard.
9.1 During the course of appellate proceedings, the appellant has filed explanation in support of Ground No. 4, the same is as under:
As seen from the above, the appellant has stated that the alleged difference of turnover Rs. 23,47,58,398/- was reported in section 'Sale of Services' of Tax Return and accordingly offered for tax. In this regard, the appellant has contended that the 14 addition of the said amount resulted in double taxation. In view of the fact, the Appellant prayed to delete the addition of Rs.23,47,58,398/- made by the AO on account of the alleged difference in turnover.
9.2 The submission made by the appellant has been considered and the same is found to be acceptable to the subject matter of the appeal. Further, the claim of the appellant has been verified vis-à-vis with the ITR filed and audit report in form 3 CD. On verification, it is evident that the appellant has declared a turnover of Rs.548,12,65,954 as sale of goods and Rs. 23,47,58,398/- as sale of services, total turnover amounting to Rs.571,60,24,352/-.As such, it is held that there is no difference between total turnover declared by the appellant as per the ITR to the turnover as per the audit report in Form 3CD.It is also seen that the appellant has paid taxes on the income computed as per the turnover declared in the ITR. It is settled principle that the same income cannot be taxed twice. As such, the amount made as addition being difference in Turnover is to be deleted.
There is no doubt that the income shall not be taxed twice as per the provisions of the Act. Therefore, the AO is directed to delete the addition made in this regard. Accordingly, the Ground No. 4 of the appeal is allowed."
7. At the outset, the ld. DR representing the revenue submitted that there were huge differences in the opening and closing stock of the assessee, during the year under consideration which were thoroughly examined by the ld. AO and have brought on record and accordingly the additions were made. The ld. DR reiterated the facts of the case. The ld. DR further referred to the TAR in Form 3CD of the assessee, have mentioned that there are differences in the quantities of assessee's opening as well as closing stock, which were wrongly examined by the ld. CIT(A) and granted the relief to the assessee. The decision of ld. CIT(A) was therefore does not reflect a proper appreciation of facts of the case. The ld. CIT(A) had erred in deleting the G.P. additions on out of book sales, inconsistencies between the reported figure and actual inventory reports of closing stock, opening stock of raw-material as well as finished goods and work- ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
in-progress, therefore there was a gross misapplication of the principles of tax assessment by the ld. CIT(A). It is prayed that the order of ld. CIT(A) needs to be set-aside and the additions made by the ld. AO deserves to be restored.
8. Per contra, the ld. AR submitted that there were no discrepancies in the financial statement and supporting documents. It is also submitted that the grounds raised by the Department appears to be incorrect, as they refer about the inconsistencies in the report figure and actual inventory record, whereas there was no actual inventory report. The ld. AR further referred to various evidence such as return of income, notes on financial statements, audit report etc. The submissions made by the ld. AR are further summarized in a written note which is placed on record, the same is extracted hereunder for the sake of completeness.
"We refer to the hearing in the above appeal on 24 December 2025. Liberty was granted during the hearing to provide a short submission and reconciliation of the amounts disallowed by the Ld. Assessing Officer in respective grounds. Therefore, the present note.
A. General submission
1. At the outset it is submitted that the entire addition is on the basis of alleged difference in the figures as appearing in Part A-P&L forming part of Return of Income and the figures appearing in the audited financials of the assessee.
2. It is submitted that, as can be seen from the ensuing submission, there is no such difference, and the same is only because of different presentation of the figures under different rows of the ITR. In any event, such alleged difference cannot be a ground to make addition under the Act.
3. It is firstly, pertinent to note that during the year under consideration the assessee has disclosed a substantial returned income of Rs. 99.83 crores (para 1 of the AO).
4. It is submitted that the assessee has offered income to tax as per audited financials.
The profit before tax as per audited financials is Rs. 10372.74 lakhs (page 141 of the PB). The same is the starting point in the computation of income at item 1 in Schedule BP (page 193 of the PB). Thus, when the basis of computation of income is the audited financials and no discrepancies have been found out in the audited financials 16 ITA No. 6262/Mum/2024 Diversey India Hygiene Pvt. Ltd.
then mere alleged error in reporting of figures in Part A-P&L forming part of ITR of the assessee cannot be a basis to make any addition to the total income of the assessee.
5. It is submitted that the books of account of the assessee have not been rejected by the Ld. AO.
6. Moreover, estimated additions have been made, on the pretext that since there are differences in figure of opening and closing stock, therefore, it is presumed that goods are sold outside the books and accordingly, estimated profit percentage of the discrepancies in the stock figure has been added to the income. This, in our humble submission, is not justified. It is submitted that, no estimated addition can be made without rejecting the books of account and without making an assessment u/s 144 of the Act, as held by the Hon'ble Karnataka High Court in case of CIT vs. Anil Kumar & Co. reported in [2016] 386 ITR 702 (Kar) - see para 11.
Without prejudice to the above, the following submission is made, ground wise. B. Ground 1: Whether on facts and circumstances of the case and in law is the Ld. CIT(A) erred deleting of the gross profit addition for alleged out-of-book sales despite the Assessing Officer's findings of discrepancies in the financial statements and supporting documents?
1. Firstly, the ground of appeal is incorrect, as there is no discrepancies in the financial statements and the supporting documents. The alleged discrepancy as brought out earlier, is in respect of presentation of figures in the Part A-P&L forming part of ITR of the assessee.
2. The AO in para 5.5 of the re-assessment order, derived the closing stock of raw material amounting to Rs 135,38,45,855 for the purpose of computing the disallowance of Rs 71,69,96,765 by applying the gross profit ratio of 52.96%. While making additions to arrive at the closing stock of raw materials, the AO has considered the amounts from different documents that has been tabulated in below table.
Sr. Particulars Amount Remarks - source of figure
No.
derived by the Ld. AO
1 RM at the beginning of As per Sr No. 5(i) for
the year Opening Stock of RM of
Part A- P&L of ROI.
(page No 186 of PB)
Add: RM Purchase 2,40,97,23,552 As per Sr No. 6 for
purchases of Part A - P&L
of ROI. (page No 186 of PB)
2,40,97,23,552
17
ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
Less: RM Consumed* -1,05,58,77,697 As per para 18 of the notes to
financial statement, (page No.
161 of the PB)
RM at the end of the 1,35,38,45,855
year - (A)
2 Gross Profit ratio (%) - 52.96 As per clause 40(b) of Tax
(B) Audit Report. Refer page 220
Additions made 71,69,96,765
(A)*(B)
Thus, the Ld. AO has taken two figures i.e., opening stock and purchases from Part A- P&L of ROI whereas, the figure of consumption has been taken from audited financials. The calculation, therefore, is incorrect.
3. A complete reconciliation was provided to the Ld. CIT(A) which is reproduced at page 21 of the order of the Ld. CIT(A). A table providing details of raw material consumed and purchase of traded goods and its disclosure in ITR is as follows:
Sr. Particulars As per Disclosure in Remarks
No. Financials ITR (Rs)
(Rs).
1 RM at the 2,43,06,004 As per clause 18
beginning of the for cost of raw
year material and
components
Add: Addition on 10,02,76,541
consumed of
account of
statement of profit
amalgamation
and loss, (page
12,45,82,545 No 161 of PB)
Add: Purchase 1,06,82,57,510
1,19,28,40,055
Less: RM at the 12,18,04,328
end of the year
Less: RM sold 1,86,83,225
Cost of RM 1,05,23,52,502
consumed - (A)
2 Add: Purchase 1,35,73,71,050 As per clause
of Traded 18.1 for purchase
Goods-(B) of traded goods of
statement of profit
and loss. Refer
page No 161 of
paper book.
18
ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
Total (A)+(B) 2,40,97,23,552 2,40,97,23,552 As per Sr. No. 6
for
purchases of Part
A
- P&L of ITR.
Refer page No.
186 of Paper book
4. There is no difference in the amounts considered in the financials and as per the ITR and the appellant has considered each item of raw material as per financials while filing ITR. The same is explained in the table earlier. For the sake of brevity, the same is explained hereunder:
a. The opening stock of raw material Rs. 12.45 crores is forming part of the consumption of goods and is not disclosed separately in the Part A-P&L of the ITR. Therefore, the Ld. AO has erred in taking opening stock as NIL. b. The purchases of raw material is of Rs. 1,06,82,57,510/- whereas the Ld. AO has taken total purchases of Rs. 240,97,23,553/-. The later figure includes total consumption of raw material and purchase of trading goods. Thus, the working of Ld. AO is incorrect.
c. Further, the closing stock of raw material is Rs. 12,18,04,328/- which is forming part of the consumption of goods and is not disclosed separately in the Part A-P&L of the ITR. Therefore, the Ld. AO has erred in taking closing stock as NIL.
The reason for above presentation in the ITR form, is that there is no provision/ row to mention purchase of traded goods separately and purchase of raw material separately. Therefore, aggregate amount of cost of raw material consumed and traded goods have been mentioned in 'Purchases' in ITR by the appellant (Refer page 186 of paper book).
No discrepancy has been pointed out in the reconciliation provided by the assessee and as accepted by the Ld. CIT(A), during the course of hearing. Therefore, the Ld. CIT(A) has rightly deleted the additions of Rs 71,69,96,765 made in the re-assessment order.
Ground 2: Whether on the facts and circumstances of the case and in law is the Ld. CIT(A) is justified in accepting the assessee's claim regarding unclaimed closing stock when the Assessing Officer found inconsistencies between the reported figures and the actual inventory records?
Firstly, there is no reference to any figures in the grounds of appeal raised. Secondly, this ground deals with closing stock, whereas the second addition in para 6.1 refers to alleged discrepancy in the opening stock. Therefore, this ground appears to be incorrect. Moreover, the ground of appeal is also incorrect on the ground that there were no inconsistencies in the reported figure and actual inventory record. There was no actual inventory record. Therefore, the ground of appeal is incorrect. The AO in para 6.1 of the re-assessment order, has alleged that the assessee had 19 ITA No. 6262/Mum/2024 Diversey India Hygiene Pvt. Ltd.
claimed opening stock of raw material at Rs "NIL" instead of Rs 12,45,82,545 and after applying gross profit ratio of 52.96% on the same, made an addition of Rs 6,59,78,916. Opening stock of raw material is already forming part of raw material consumed as explained in the earlier ground. For the sake of ease, the same is explained again hereunder:
A table providing details of raw material consumed and its disclosure in ITR is as follows:
Sr. Particulars As per Disclosure in Remarks
No. Financials ITR (Rs)
(Rs).
1 RM at the 2,43,06,004 As per clause 18 for
beginning of the cost of raw material
year and components
consumed of
Add: Addition on 10,02,76,541
statement of profit
account of
and loss. Refer page
amalgamation
No 161 of paper
12,45,82,545 book.
Add: Purchase 1,06,82,57,510
1,19,28,40,055
Less: RM at the 12,18,04,328
end of the year
Less: RM sold 1,86,83,225
Cost of RM 1,05,23,52,502
consumed - (A)
2 Add: Purchase 1,35,73,71,050 As per clause 18.1 for
of Traded purchase of traded
Goods-(B) goods of statement of
profit and loss. Refer
page No 161 of
paper book.
Total (A)+(B) 2,40,97,23,552 2,40,97,23,552 As per Sr. No. 6 for
purchases of Part A
- P&L of ITR. Refer
page No. 186 of
Paper book
There is no difference in the amounts considered in the financials and as per the ITR and the appellant has considered opening stock of raw material as per financials while filing ITR. The opening stock of raw material Rs. 12.45 crores is forming part of the 20 ITA No. 6262/Mum/2024 Diversey India Hygiene Pvt. Ltd.
consumption of goods which forms part of purchases in the ITR and is not disclosed separately in the Part A-P&L of the ITR. Therefore, the Ld. AO has erred in taking opening stock as NIL.
No discrepancy has been pointed out in the reconciliation provided by the assessee and as accepted by the Ld. CIT(A), during the course of hearing.
Therefore, the Ld. CIT(A) has rightly deleted the additions of Rs 6,59,78,916 made in the re-assessment order.
Gound 3: Whether on facts and circumstances of the case and in law the Ld. CIT(A) failed to consider the Assessing Officer's valid findings regarding the discrepancies in reporting excess finished goods and work in progress, thereby misapplying the principles of tax assessment?
1. The AO in para 6.1 of the re-assessment order, has alleged that the asssessee had claimed excess finished goods (opening stock) of Rs 27,74,504 and the work in progress as opening stock of Rs 29,82,347.
2. The amounts considered by the AO in the order and the appellant in the ITR is tabulated below.
Particulars As per Para Considered Working of Remarks
6.1 of Order by AO figure
reported in
ITR
Finished goods 15,64,16,072 15,64,16,072 15,64,16,072 As per note 19
-DIHPL for
inventories at the
beginning of the
year.
Refer page No
162 of Paper
book
27,16,79,948 27,16,79,948
Finished goods
DIPL-(A) 29,82,347 -
Work in AO has not
progress- considered this
DIPL-(B) amount to arrive
at
opening stock of
finished goods
On 27,46,62,295 27,46,62,295 As per note 19
Amalgamation on
- (A) + (B) Amalgamation.
Refer
page No. 162 of
Paper book
(C) 42,80,96,020 43,10,78,367 .
21
ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
(increase)/
decrease of
excise dutv on
inventory
Excise duty on 87,79,033 As per note 19
closing stock for excise duty
(1) on Closing stock.
Refer page No.
162 of Paper
book
Excise duty on 89,86,876 As per note 19
opening stock for excise duty
(2) on Opening
stock. Refer
page No. 162 of
Paper book
(1)-(2) -2,07,843 AO has not
considered this
amount to arrive
at the opening
stock of finished
goods.
Refer page No.
162 of Paper
book
Opening stock 43,08,70,524 As per Sr No.
of 5(iii)
finished goods for purchase of
Part A- P&L of
(D) return of income.
Refer page
No.186
(D)-(C) 27,74,504 Addition made
by AO
1. As indicated in the above table, while arriving at the opening stock of finished goods for AY 20116-17, the Ld. AO has not considered Work in Progress of Rs 29,82,347 and excise duty on opening stock of Rs 2,07,843 and accordingly, the difference of the same i.e. Rs 27,74,504 has been treated as unexplained expenditure under section 69C of the Act and added to the total income. Once these two amounts are considered in the calculation by the Ld. AO then there will not be difference and there will not be question of additions of Rs 57,56,851 (Rs 27,74,504 + Rs 29,82,347) made by the Ld. AO.
2. Further, it can be seen from the table above that closing Work in Progress of erstwhile DIPL of Rs 29,82,347 has been considered in the opening stock of finished goods in the ITR of AY 2016-17. Accordingly, even the second allegation of the Ld. AO that closing Work in Progress of erstwhile DIPL has not been considered in opening stock in ITR of AY 2016-17 and accordingly the same is out of book sale is incorrect and erroneous.22 ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
3. The above calculation is brought out in para 8.3.1 of the order of Ld. CIT(A) on page 28 and has been accepted by the Ld. CIT(A).
Therefore, the Ld. CIT(A) has rightly deleted the additions of Rs 57,56,851 (Rs 27,74,504 + Rs 29,82,347) made in the re-assessment order. Ground 4: Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition made for the difference in turnover when the Assessing Officer identified substantial discrepancies between the figures reported in the tax return and the tax audit report?
The AO in para 7.1 of the re-assessment order, has alleged that sale of goods in the ITR is shown at Rs 548,12,65,954 whereas turnover as per Form 3CD of tax audit report is shown at Rs 571,60,24,352 and accordingly, added the difference of the same of Rs 23,47,58,398 to the total income.
The amounts of turnover reported in tax audit report and the same has been disclosed in the ITR is tabulated below.
Particulars Amount Remarks
Sale of products/ 548,12,65,954 As per Sr No. 1(A)(i) for Revenue from
goods operation of Part A- P&L of return of
income. Refer page No.185
Sale of services 23,47,58,398 As per Sr No. 2(x)(b) for any other income
of Part A- P&L of return of income. Refer
page No.185
Total 571,60,24,352
The difference is in respect of sale of services which is shown separately in ITR but a consolidated figure is shown in the tax audit report.
The Ld. CIT(DR) has on an earlier occasion filed a written submission, wherein he had accepted this issue.
Therefore, the Ld. CIT(A) has rightly deleted the additions of Rs 23,47,58,398 made in the re-assessment order.
Argument of the Ld. DR at the time of hearing.
The Ld. DR was referring to some figures of quantity of opening and closing stock of raw material and figure of consumption as brought out in the tax audit report. It is submitted that, firstly, the said working is not the basis of the addition. A completely new issue was raised by the Ld. DR at the time of hearing, which in our humble opinion is not permissible. The discrepancies as raised in the assessment order and complete reconciliation of the same is provided before the Ld. CIT(A) and before the Hon'ble Tribunal and therefore, no addition should be sustained.
23 ITA No. 6262/Mum/2024
Diversey India Hygiene Pvt. Ltd.
3. In any event, the figures as referred to by the Ld. DR do not further the case of the Department. The figures are quantitative details and not in terms of value. Further, quantitative reconciliation was never called for by the Ld. AO in the course of hearing. Merely pointing out the figures in the tax audit report without understanding the entire process of manufacturing, the nature of products manufactured, and what raw materials are used for manufacturing, no reliance can be placed on some figures as appearing in tax audit report."
9. Based on aforesaid submissions, it is argued that the ld. CIT(A) has examined the facts on record thoroughly, had arrived at a logical conclusion that there were no discrepancies, as pointed out by the ld. AO under misreading of the facts and therefore the additions made on account of alleged inconsistencies in the accounts of the assessee are liable to be vacated. The well-reasoned and speaking order of ld. CIT(A), thus, deserves to be upheld, the appeal of revenue is liable to be rejected.
10. We have considered the rival submissions and perused the material available on record and the reconciliation / explanations furnished by the ld. AR before us. We find that all the figures in the P&L schedule in ITR as well as the figures in the financials of the assessee are matching, which is duly examined by the ld. CIT(A) and after a thorough examination have decided the appeal in favour of the assessee by directing to delete the additions made on account of alleged inconsistencies which were duly explained by the assessee by furnishing the reconciliations before him. Since, the observations of ld. AO are invalidated by the ld. CIT(A) after verification of facts with analysis of the reconciliations furnished, observing that such findings of AO were factually incorrect and cannot stand, as the clarifications are duly supported with documentary evidence and 24 ITA No. 6262/Mum/2024 Diversey India Hygiene Pvt. Ltd.
explained. The reconciliations and reasons for apparent differences in stock have been explained by the Ld. AR before us, which were found to be consistent with the observations of the Ld. CIT(A) and sufficient to reverse the doubts raised by the AO, thus renders the disallowances made untenable. Under such facts and circumstances, we do not see any reason to interfere with the decision of ld. CIT(A), which thus stands affirmed.
11. In result, the grounds of appeal raised by the revenue in present appeal are rejected and the appeal stands dismissed, in terms of our aforesaid observations.
Order pronounced in the open court on19-03-2026.
Sd/- Sd/-
(AMIT SHUKLA) (ARUN KHODPIA)
Judicial Member Accountant Member
Mumbai, Dated : 19-03-2026.
*SK, Sr. PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. DR, ITAT, Mumbai
4. Guard File
5. CIT
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai
25